TKP Corporation (3479) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Thank you so much for waiting. We'd like to start the Earnings Announcement Session for TKP Corporation for the Full Year Ended in February 2023 as well as the announcement of the new medium-term management plan. First, let me introduce participants from TKP. To your left, Chief Executive Officer, Mr. Takateru Kawano; and then Director and CFO, Mr. Koji Nakamura. Based upon the presentation of the full year results that we announced today, and we are going to take you through the new medium-term management plan as well as the full year results. And then we are going to have the Q&A session at the end. And we are planning to end this session at 5:00 Japan time. Mr. Nakamura is going to take you through the first part of the presentation.

Good afternoon, ladies and gentlemen. Hi, my name is Nakamura, the Director of the company. Today, I'm going to explain the full year results as well as the new medium-term management plan to be explained by the CEO, Mr. Kawano. So we have 2 parts of the presentation today. Let's get right into the explanation of the results. This is a summary of today's announcement. There are 2 parts of the presentation. First, results of the -- full year results ended in February 2023. We closed on the deal of the sale of Japan Regus on February 1, and we posted a little bit over JPY 6 billion extraordinary loss. But our core business of TKP is doing very well. So we were able to achieve a significant increase in profits, and we turned successfully into our core businesses into profitability. In addition, we have made the new medium-term management plan covering for 3 years. And at each level of the profits as well as net sales for 3 years, we are planning to target at the record-high levels. So the market is recovering, and we are planning to gain share in the recovering market. That is the new medium-term management plan. And we are going to explain about that in more details later on. Now let's get right into the results for the full year ended in February 2023. First, on the consolidated basis, please look at the red box. This is the Q4 results as well as cumulative full year results for the year ended in February 2023. Net sales were JPY 50.5 billion. OP was JPY 3.5 billion. Compared to February 2022, on a year-on-year basis, revenue were up significantly, and each level of the profit was significantly increased versus last year. As I mentioned earlier, due to the sale of Japan Regus, we posted JPY 6.4 billion extraordinary loss. However, for the main business, main operation, our business has been doing very well. So the profits above ordinary income performed very strongly. And after tax, please take a look at the bottom, minus JPY 4.9 billion. On March 31, we made a division of the guidance, and we touched upon this a little bit, but there is extraordinary loss of JPY 6.4 billion associated with the sale of Japan Regus. And the tax effect related to that is a little bit of JPY 3 billion. And from the tax effect accounting for the year ended in February 2023, we can enter the benefit of tax effect, but we consulted with the CPA auditing firm. We decided to defer that to the next fiscal year or in the current fiscal year. Therefore, net profit -- net loss is significantly lower. But for the current year we are in, we are expecting the bottom line profit to jump up. So I'm going to explain about that in more details when we explain about the new medium-term management plan. So we were able to close the book with very strong results on a consolidated basis for Q4 of February 2023 as well as the full year. Now let's take a look at net sales and OP in each fiscal year compared to other preceding years. On the left-hand side, we are showing February 2020 net sales before COVID. And compared to pre-COVID, net sales are still lower. We have not really recovered fully to the pre-COVID level, but we posted net losses in 2 years after COVID, but we were able to successfully turn that into profitability. And our operating profit level is quite a good level. So this is a track record over the most recent 4 years. And this includes Japan Regus business in those years. And excluding Japan Regus, looking at 4 years, recovery is more obvious in terms of the OP recovery that is more obvious, excluding Japan Regus business. And please turn to the next page. This is a trend of net sales and operating profit, excluding Japan Regus business. And recovery is faster, and the recovery is much more in terms of the profit recovery from pre-COVID level. From February 2020, we successfully turned that into profitability, and absolute level of profit is quite large on a consolidated basis. So highly profitable businesses that we have, have seen even better profitability going through the COVID. So this is something that you can appreciate from this slide. Next, balance sheet and cash flow on a consolidated basis, and this is a summary page. As you can see on this page, first, please look at the second line. Cash has increased quite significantly. And around in the middle, liability is total. And beneath that, there's balance of interest-bearing liabilities that has been reduced significantly due to the sale of Japan Regus. Loans associated with Japan Regus were repaid partially. And also, we have been paying liabilities as scheduled. And as a result, interest-bearing debt has been reduced by about JPY 24 billion. However, cash has been JPY 32 billion, which is JPY 18.7 billion more compared with the previous fiscal year-end. So the balance sheet has become much more sound, and we have been able to clear all the covenant conditions. And this may sound as a matter, of course. Same goes for the cash flow. It's much cleaner. In particular, free cash flow has been very strong, and operating cash flow is very solid as well. So financial status of TKP has become very stable at the end of February 2023. Now let's take a look at details of each business, starting with the actual result of opening and closing of locations. In Q4, there hasn't been much activity in terms of closing and openings. But for the full year, we opened additional 4, and we closed 5, so not so much activity there. And in Q4, we have opened Sunlife Hotel, which is a unique business hotel operation, which we opened, but we have not really opened many locations, but we have a strong pipeline of new coming openings. In March onwards, we have been opening more aggressively the new locations, which is described on the next page. The new openings and renewal. And these pictures show new openings and renewals for the new fiscal year after March. And if you look at ISHINOYA Atami, which is at above, which is a high-end inn -- Japanese inn. During COVID, this inn has performed very well. Therefore, as you can see from this slide, for all guest rooms, there's a hot spring, spa, and we have renewed all guest rooms and opened renewed rooms in April. And spa is in each guest room, which is a quite high-end and luxurious atmosphere. So this is a much more than the pre-renovation. And at the bottom, we are showing new locations or banquets and the rental meeting rooms and expanded floor space from April to July for this month. We have additionally opened 5,700 tsubo, totaling 5 locations. And [ neya ] Tokyo, [ neya ] Akasaka, [ neya ] Shibuya are highly prime locations. We have a strong pipeline of new locations. So there will be a flagship facilities, and we are opening these facilities in a series at this point. And on February 23, in the slides before, I said that we did not have much activity. And we now own 237 facilities with 140,000 square meters, but we are also going to step up on axle to speed up the opening activities. And for our core business for TKP's rental meeting room business and the accommodation business, let's look at the core business for TKP. The revenue and operating profit graphs have been shown in the previous slides. And when we exclude the Regus business, we said the recovery was much more evident, and you can see that on this table with figures. So for this fiscal year, we had a revenue of roughly JPY 30 billion or JPY 29.9 billion. So that was on a year-on-year growth of roughly 20%. And the different levels of profit has been growing very significantly, especially with the operating margin. At the bottom right, you can see that in the red line, the OPM was 15.7%. This is actually a record-high operating margin since IPO. And we still have some impact of COVID-19 in February '23. But despite that, we were able to achieve a very high level of operating margin. Also we have a very lean operation, and we will be able to go into the recovery phase after COVID-19, and you can see that with the business performance in February '23. And next page is the revenue mix by service. Service, meaning the room rent and option sales, as is the different menus of service that we provide, then we show you the sales mix by service. Normally, for Q3, this is the full busy season. So normally, Q3 will be bigger than Q4 in our case. However, for this fiscal year or the fiscal year that just ended, Q4 was actually bigger than Q3. So the revenue in Q4 was bigger than Q3. And this is because we are seeing average recovery from COVID-19, and the demand is very steady and Q4 demand was very strong, especially with the [ test venue ] demand. And also in December, we opened this Sunlife Hotel, and the demand is building up for the Q4. And that's how we have been able to steadily grow the revenue in the fourth quarter. And this is the KPI for the rental meeting room business. This is the sales per tsubo. And we're seeing a very steady growth, and that trend has continued. And earlier, I said that operating margin was a record high. And what I would like to note is that before COVID-19, the sales per tsubo has actually been coming down. However, the operating margin is at its peak right now, meaning that the breakeven point has become lower significantly. So we have a very profitable structure as we generate sales. And you can also see that a further trend of this KPI. And next, this is the sales mix by usage of the rooms. So the usage means like a training for seminars or recruiting, depending on how the customers use the room, we show the sales breakdown. And for February '23, this is what we have seen. This is actually close to what we have observed before COVID-19. For February '21 or February '22, you can see that there is a lot of fluctuation in the sales mix by quarter. And this is because sometimes we have special demand, and the normal demand has dipped in some quarters. So that's why you see fluctuation in the sales mix. But for the fiscal year ended in February '23, it became very stable. And the sales mix have started to become very similar to what we saw pre-COVID. So we are starting to see normalization of our business, and that is reflected in this mix. And we will be entering the February '24 fiscal year. And looking at the demand and the order backlog, we can see that this sales mix will continue to be stable. And lastly, on the Japan Regus business, we closed the transaction effective February 1, '23 as the 11-month worth business is consolidated into our books for February '23, and that's how the business for Regus looks like. And they will be gone for the current fiscal year. So this is just for your reference. So that's the quick summary of our financial results ending in February '23. So now we'd like to dive into our 3-year midterm management plan, and we would like to elaborate on our strategy. Mr. Kawano will present on this topic.

Thank you. Let me elaborate on our midterm management plan. First, this is the basic policy. So whilst proactively expanding the leasable space for rental meeting rooms, we will expand into peripheral business in order to gain market share and grow T-A-M, TAM. For the existing business -- the existing business, we categorized the business into core business and noncore business. And we keep the core business, which is the rental meeting room business and the hotel business. So this will be the core of our business portfolio. And up to now, we have not been expanding our leasable floor space, but we are going to grow the total leasable floor space, and we'd like to actively grow. And also, in the last 3 years, TKP has become very lean, and our management structure has become very efficient. Also as Mr. Nakamura mentioned earlier, we were able to achieve the record-high operating margin in the last fiscal year. And with that as a base, this fiscal year, we'd like to achieve the record-high profit for different [ levels ] profit items. And also, we like to strike balance between aggressiveness and rationale to flexibly invest for growth. If we see investment opportunities, we'd like to proactively consider that. And TKP will be active in the financial activities and also business activities. Also through investment for growth, we'd like to aim for enhancing the enterprise value. So #1 and #2, expanding the leasable floor space and also achieving the record-high profit. Whilst doing that, we will continue to seek and capture opportunity for growth investment. And to give you some numbers, this fiscal year is February '24. And for the next 3 years, we would like to achieve a revenue CAGR growth of 23%. And this fiscal year, we are aiming for an ordinary profit of JPY 5 billion and after-tax profit of JPY 6.7 billion. Both will be a record high for the company. And for next fiscal year, we are aiming for a JPY 7.2 billion in operating profit. And for February '26, we are aiming for JPY 57.5 billion as revenue. So we will not have the Regus business anymore, but this revenue target will be bigger compared to when we still have the Regus business. And these numbers include the existing operations and reflect the existing organic operations. So we have [ stick the capital lines ] for business online for SHIKIGAKU, and also, we have acquired some stake of Lilycolor, and they are becoming our [ equity affiliate ] methods. But those numbers are not reflected in the numbers in this new midterm business plan. We hope that they will give us incremental opportunities. But once again, I'd like to reiterate that we will be active for investment opportunities, and there will be incremental numbers on top of these figures you see on the slide. And I want to reiterate that these figures are based on the current organic business. And next is the direction of how we want to expand our business. So we're not just trying to simply go back to the pre-COVID-19 level and increase the floor spaces for rental rooms and the food and beverage services and other peripheral services. But we also want to expand the intangible or the peripheral services. So the horizontal arrow shows how we are going to expand the floor space, there were the tangible asset, and the vertical arrow shows how we are expanding the intangible assets. As both for the tangible and intangible aspect, we would like to achieve growth so that we can expand the market and also have a wider coverage of the addressable market. And as you can see, we have the rental room business, accommodation business, the banquet business. And then we have the BPO training, event planning and operation. And we have the office solution, F&B, new business, regional revitalization, PFI and turnaround support. Also these are all going to be incorporated into our business portfolio. So we're not just targeting the office buildings in the metropolitan area, but we want to expand further. On the next page, we are showing the recent track record of our M&As and the strategic investments. And with regards to SHIKIGAKU, which we have just announced. So existing customers who are using TKP services, HR divisions and general affair divisions of those client companies, we'd like to provide them with our training programs. And we have been winning major companies as customers. So SHIKIGAKU has started their business to the management, but we would like to expand business not only to the management team but also managers and employees. With regards to the partnership with Lilycolor, this is a company who does the reform refurbishment and wallpaper company. So renovation and refurbishment are their expertise. And I'm going to explain in more details later on. But in Nishi-Kasai, we have a track record of converting hospital rooms to guest rooms, converting up a hotel. And this was the start of a partnership with Lilycolor for that transaction. So we are leveraging on that. And we have this very unique endeavor with Lilycolor converting hospital rooms to guest rooms. And I was impressed by this project because they have worked on not just simply abolishing abundant building, but they really showed the ability to convert the hospital into usable guest room building. So the growth of walls and wallpapers, we started to do business with them, placing orders for those materials. And we are going to do so continuously. And we have renovation business, LecTore and ISHINOYA APA Hotel. So we have those businesses. So we'd like to actively use Lilycolor's products for those businesses, and we would like to leverage renovation, which is their know-how area expertise. We would like to have new businesses in those areas. So not only TKP, but we work with property owners and the partners who have condominiums and buildings, not only office buildings, but they are the owners of many different assets. So for example, there will be newly built office buildings and other types of buildings. And buildings, we cannot afford to continuously invest will fade away. So same goes for the hotels. There will be so many distressed hotels who are not able to afford to invest. So with the capability of Lilycolor, we'd like to actively do business in those areas using their expertise, and that's why we decided to invest in Lilycolor. And this is the market of office. Recently, there's an increase of the new supplies of office into the market. For example, for this fiscal year, FY 2023, 224,000 new tsubos is supplied into the market. Next year, 120,000. And then a year after that, 180,000. So vacancy has been increasing to 6.7% now. So from our perspective, this is a great opportunity for us to source, sourcing opportunity. This is just like right after the demand crisis. Vacancy ratio increasing and which provided us with a significant opportunity for sourcing and similar opportunity is coming. After going through a COVID period for 3 years, at last, we see the new supplies coming on to the market. In the last fiscal year, new office supply was 80,000 tsubo and 115,000 and in this year -- 2 years, 195,000 tsubo. But in this fiscal year, 224,000 tsubo new supply is projected in 23 wards of Tokyo. So those new supply has to be occupied by tenants. So they are trying to reduce the leasable floor space to fully occupy or giving tenants with free land, and there are new tenants moving out. So here and there, there are vacancies. And there are foreign companies coming into the Japanese market, expecting demand to surge and the venture industrial business is to boom. If that's the case, it's a separate story. But according to the current status, all we see is just a new supply added to the market, which will give us a significant opportunity for us to source. On the time basis, we can sublease and we can convert flexibly into our leasable floor spaces. So that is a great opportunity. And this is office market. So -- and also our rental meeting room share. As you can see, we expect it to go up. After going through COVID, we expect our share to increase in coming years. And right now, we are projecting market share to be over 40% in 2025. And the total unoccupied or unoperated office is estimated to be JPY 700 billion nationwide. So we can tap into that, and we can expect our sales to increase. And our share in this not-utilized or underutilized tappable market is only 3%. So there's still plenty of untapped market. And next, let me talk about our business strategy for the rental meeting room business. Rental meeting room business compared to before COVID has completely recovering. And the driver for the recovery is party, which is not fully recovered yet. So that's going to be the future driver, but it's not fully recovered. But looking at current orders, when I talked to you last time, recovery was only 15% recovery. But right now, recovery is 40%, 50% type of recovery. And next -- in May and June, next month and a month after next month, we expect recovery to accelerate. And the COVID category is going to be changed in May so that will trigger the full speed of recovery. And Japanese bar, izakaya, is going to have more traffic and there are more large group parties. So party demand, especially B2B party demand. Last, we see the light at the end of the tunnel. And our strategy for the rental meeting room is to expand the floor space by 10,000 tsubo in Tokyo and Osaka mainly. And for the most recent few months, I think we can expand by 7,000 to 8,000 tsubos in the short term, and 5,700 tsubo has been already decided to increase for the new renewal open, expansion open, for the most recent few months. So we have secured 7,000 -- 8,000. And then I would like to really expand this space -- accelerated space. I have no intention to really look at expensive rent, but at the appropriate rent that we think it's viable, we'd like to expand the leasable area. And this is the target in 3 years. We'd like to in-source more and more and strengthen DX, providing more added values to maximize the profitability of our company. Targets after 3 years. Net sales, JPY 41,000 per tsubo and leasable area, 79,000 tsubo. Those are our targets for this new medium-term management plan covering for 3 years. Next, let me talk about DX initiatives. At last, Phase 1 implementation is going to start soon. So June booking renewal -- system renewal, we are going to introduce dynamic pricing system. And customers are going to be able to book by themselves easily and manage their bookings easily on their own. So we are going to introduce those functions. Usability and the convenience of customers will be much enhanced for the booking IT system of TKP rental rooms. Next, hotel business. This is going to be the second largest pillar following the rental meeting room business. For 3 years, we have APA Hotel brand as well as LecTore, ISHINOYA Resort Hotel brands, centralizing around those major brands. We are going to launch 10 new locations, and sourcing is going to vary. Ownership format or leasing format, looking at the economical [ situation ] of each time we are going to decide. In apart from ISHINOYA for resort hotel business through renovations and refurbishment, we would like to enhance our branding in order to capture the inbound demand. As earlier, we announced about the ISHINOYA in Atami and 35 rooms reduced to 20-plus and 2 rooms are put together to make a larger room and the hotspots and sauna and cold water bath were equipped to each of the rooms. And also at the rooftop, we do have a very nice rooftop facility and enhancing the value proposition. We like to increase the room rates or the ADR. And we'd also like to invite the foreign tourists to enjoy our hotel. So we'd like to capture the inbound demand and also including the employees of foreign [ capital ] companies. We hope that they will use our facility as a group. So in order to capture those opportunities, we'd like to enhance our brand. And across Japan, we operate 21 facilities -- accommodation facilities. And we started this business 10 years ago from 2013. And for the hotel business, we originally started with the company accommodation facilities and training centers to establish LecTore. And the facilities that was previously used for different purposes like hospitals or hotels or the buildings, we renovated them to convert them into APA Hotel. And we also renovated the Japanese Iseya Ryokan to establish the ISHINOYA brand. Also in this market, we will we have 21 facilities, and we built 5 out of scratch, also by procuring land. But for the others, we are leasing the land or we have renovated the existing facility. So those type of facilities will count to 12. So for TKP, we'd like to capitalize on this expertise to do the turnaround business or the renovation and refurbishment business and put more focus on these services. And next, our financial policy and also shareholder return. So first, we have the operating cash flow. We will no longer have Regus as the operating cash flow is recovering very quickly. And using this operating cash flow from the financial perspective, we will be very sound. So we will have a very good generation of cash and also for growth opportunity and investment and as we look at the interest rate level to borrow as needed. And then for the equity financing, we can expect a very robust generation of operating cash flow. So in principle, we will not intend to do an equity offering. And next, the capital allocation and shareholder return policy. First, we would like to invest for organic growth. So we have 2 business pillars, the rental meeting business and hotel business. And we'd like to achieve organic growth by investing into those 2 pillars of business. And the second will be M&A and also investing into new business opportunities. For this, we would like to strike synergy with the existing businesses to expand on the peripheral business. So for TKP we would like to enhance the enterprise value over the medium to longer term, and that will be the focal point as we consider investment opportunities. So I would like to achieve both the financial softness and also invest for growth to achieve both. And also regarding our shareholder return, dividend and share buybacks. Also, we'll be looking at the progress of our midterm management plan and would like to consider this shareholder return. So as TKP, we'd like to strike balance. So first priority will be investing for organic growth, and then we like to invest for M&A and also invest for new business opportunities for the peripheral market. And then by striking balance, we'd also like to consider shareholder return. Next, these are the activities for February '24. So as you can see on this slide, we will be aiming for a growth of 10,000 tsubo for the rental room business, and we will be enhancing our existing facilities -- hotel facilities. So from the end of this fiscal year and early next fiscal year, we will be opening new facilities. But in the 3 midterm business plan, we will step up our efforts to reinforce the brand of the existing facilities and also do more renovations. And also, we will be opening Makuhari Hall in July, and we'll be starting the operation of that. And with COVID-19 behind us, there will be demand for large banquets, and we would like to be active in managing the large banquet facilities as well. Especially for the receptions and parties from June onward, we feel that the demand is coming back very strongly. So we would like to step up efforts for the banquet services as well. And also, under COVID-19, we have been refraining from active recruiting for TKP, but we will be reinforcing that as well. And also, we will be promoting DX strategy to gain operational efficiency. So fiscal '24, '25, '26, we will be renewing the record-high profit. And for that, we would like to build a solid structure. So for this fiscal year, February '24, we're looking at a revenue of JPY 36.3 billion, operating profit of JPY 5.4 billion and also ordinary profit of JPY 5 billion and after-tax profit of JPY 6.7 billion. So the last 3 years for us under COVID was a challenging period. But this was a great opportunity for us to become leaner. So in the last 3 years, despite the challenges and the struggles, I think we were able to redesign ourselves to concentrate into our core businesses. And I was able to draw a line between the core business and the noncore business. And we are now very lean with just the core business in our portfolio. We would like to step up our efforts to further rebuild the core business to achieve more growth. We will be aiming for a higher level so that in 3 years' time, we will be able to achieve an operating profit of JPY 10 billion. Also this year is going to be the first year under the new MTMP. And in 2 years, I think we will be able to achieve JPY 10 billion or we'd like to top JPY 10 billion in 2 years. And in the new MTMP, we do not include any impact of new businesses or inorganic opportunities. We first wanted to commit with the core business. And if there are opportunities, of course, we will be looking at M&A opportunities. And if we do not have business opportunities, that will just mean that we are going to invest into real estate. But I'd prefer to invest into business opportunities and by having a very light balance sheet or light assets. So that's how I would like to grow the business. So in the previous meeting, I said that we are now at 9 A.M. as a business status. And I think now we are ready to commit to office or go to school. And right now, in effect, we are like we have no debt, and we are now very ready to exert our core strength. Also now we are very ready to go to our office, and we will be setting our foot in the tone, and we hope that we can continue to enjoy eternal support as we try to grow. Thank you very much.

From now on, I would like to have the Q&A session. [Operator Instructions] Let's go to the person in the first row.

My name is Tazawa from SMBC Nikko Securities. I have 3 questions. So first, I'd like to confirm the numbers. On Page 12, TKP track record and also Page 19, projection of this fiscal year. If you compare the 2 for the year ended, net sales is to increase from JPY 30 billion to JPY 36.3 billion, but operating profit increases only JPY 4.7 billion to JPY 5.4 billion only, and the margin has improved to 15.7%, but you're projecting it to go down to 14.9%. But for this fiscal year, February 2024, what is the reason for the margin to decline? And also looking forward, for February 2025, operating profit margin is not going to see the recovery of the OPM to March 2023. So what is the reason for this low margin for February 2025? Is it due to the investment or efficiency of the investment or any other reason?

Thank you so much for that question. This looks funny, right? I think margin should be better. I think so. However, we are going to have 10 new hotels. If we buy the land, it takes a few years to complete the hotel and there's upfront cost until the completion. So if our main, scenario is investment in properties, then margin should go down. So we'd like to really invest in M&As or new businesses. And if we cannot do that, and if we can only invest in properties, we have money to invest somewhere. So we'd like to invest in building hotels. If there are no other opportunities, then the margin may trend this way. So we anticipate upfront investments. So we have this conservative projection for the coming 1 to 2 years.

Understood. My next question is on Page 24, the rental room rates for rental meeting room. In the final year, including Fund B Recovery, and I think price per tsubo is going to be surpassing before COVID. What will be the cruising speed level, F&B? Do you expected that to go back up to pre-COVID? And you said you're going to introduce dynamic pricing system. So 41,000, this average rate assumption, but you are expanding the floor space. So are you taking this dominant strategy in the popular areas? Are you going to have locations in the concentrate manner? So there may be some cannibalization among the locations. So what is the basis for this projection?

Well, number one, we'd like to grow organically. That's the premise. And also we were doing F&B before COVID and option sales, and we expect those sales to be added or recovered. In addition to that, the intangible software type of peripheral businesses, sales will be added like production or events as an example. And leasable rental meeting rooms area, we are going to go back to the central areas where the investment efficiency is high, then our net sales are very efficient. So compared to the same net sales per tsubo in regional areas, net sales per tsubo in the central locations or metropolitan areas, efficiency is 1.5x or twice better. So we'd like to have more concentration of locations in the efficient areas. Before COVID, we expanded here and there in various locations. But from now on, we have variable rate system, sharing cost with owners, and we'd like to work with our partners to create leasable areas, and we'd like to increase the efficiency by improving the efficiency.

My third question, this may overlap with what you have just mentioned. But would you please explain the following? So you have proceeds from the sale of Regus, and you have a little bit over JPY 30 billion in cash on deposit. So what is the usage of that? Your ROE target is 10%. But what are the usages of cash of JPY 30 billion? And what is your stance on the efficiency of investment or return on investment? For the existing rental meeting room business, I don't think it takes so much investment. But you are planning to open 10 new hotels, but what are other usages of cash like M&A, such as stake in Lilycolor? And if there's more cash even after investing in those areas, do you think you are going to use cash for returning to shareholders in the SHIKIGAKU partnership and other investments? What do you think about investment, return on investment, including the hotel business? What is your stance of the return on investment and expected synergy when you endeavor into the investments?

This JPY 30 billion cash on deposit, this was goodwill, actually, and this was converted to cash on deposit. So this amount should be spent on growth investments for the future. But considering our rental meeting room business, it's cash-generated business. It's not cash outflowing business. We can run a rental meeting room business with a cash-generated manner. So if we are going to build new locations, that's a separate story. But as of now, it's cash in business, cash-generated business. And if we start from the scratch, building from the brownfield, then it's a separate story. But it's cash-generated business. It doesn't require so much initial investment and does not require initial investment. That's why return is lower. So we have to really strike a good balance. And first, usage of cash in terms of the visible areas, in terms of the numbers, hotels, we are going to use some money in expanding locations of the hotel. And then our business investments, including M&As, this is the key area where I'd like to invest. If we cannot really invest in business areas to grow, then we have to really use cash to return to shareholders, 100% u-turn. But at the moment, we'd like to use cash in business opportunities. In the past, we worked with Otsuka Furniture and Regus. We invested in those, and we have lessons learned, and we have to really [ reflect ] those lessons that we learned from those for future M&As. And we had a significant burden of goodwill, which was very hard. So my policy is to generate return that is not -- that can weather the amount of goodwill. So we have to really cap the limit. And we'd like to invest in transactions where we have negative goodwill. And that's something that we have to really bear in mind when we think about business investments. Lilycolor PBR, 0.6 to 0.8 price to book. And also, we have synergies with TKP in business areas. So when Lilycolor works with TKP, we can expand our business mutually. I'm convinced of that. So this is not the new company. We have been working with Lilycolor in the renovation area for a long time. So I'm convinced that we can generate more synergies. So we'd like to go back to the basics. First, there are property owners who are our partners, and there are users who are -- the corporations who use our rental meeting room. And we are in between and [ Kashikagi Net ], which is the name of the matching site that I created originally. So we source on our own, and we create meeting rooms on our own, And we created this [ portal ] site as a matching business. So we can only generate profit when users use our rental meeting rooms. We are not running the advertisement business. So we are adding values such as lunch boxes, accommodation, training program, event production and so forth. So we'd like to expand our soft side of the businesses. SHIKIGAKU is a great example, and we'd like to keep our eyes on potential M&A targets. And we'd like to continuously invest in growth. And then flip side is that there are property owners who are leasing spaces to TKP. They do not have only offices. They have other assets: apartments, condominiums, hotels. So those property owners who work with TKP, we have to really propose and pitch well. And we liquidated the company due to COVID in this particular area, but we have the property business, and also we have the renovation, refurbishment business. And we can propose new things, new solutions to owners of the properties. So this is a great business opportunity. So we propose to owners, and if they have vacant spaces, then we can operate for them for the rental meeting rooms. So we can -- it's a win-win. We can establish a win-win relationship. So we are going to see how it goes as we do it. What will happen to the market and we are a contrarian, TKP is a contrarian. So if there are opportunities, then definitely we'd like to bet on it. And being a contrarian, we don't want to get hurt big, but this JPY 30 billion, I'd like to think about how to spend while we go about the businesses. And if there are no opportunities whatsoever, then we are going to use it for expanding shareholders' return or doing the buyback. Of course, we are going to start studying those options if there is no growth opportunity. But at the moment, we'd like to grow, like to prioritize on growth. And we were suppressed over 3 years due to COVID. So we'd like to put our feet on the accelerator from now on.

Next question, please, gentleman in the third row, please.

This is [ Ozawa ] from SBI. I have 2 questions. I will ask one by one. My first question is a follow-up to Tazawa-san's question. So when the sales per tsubo is increasing. I think your reason was very easy to understand because you're going to increase your footprint in the metropolitan area. But how about the dynamic pricing impact? How is it going to be different from the previous models? Also there are fluctuations in demand for rental meeting rooms. So I think you have conducted some sort of dynamic pricing. But how are you going to change your pricing going forward? And how is it going to impact your business? Can you give us some examples of how it's going to give us some impact?

Yes. So for dynamic pricing, to date, we have the unit price, and we are offering some discounts. And this was based on the relationship manager, and also the supervisors were adjusting those prices just based on gut feeling. But we are going to replace that gut feeling by AI so that the dynamic pricing will be conducted backed by data. So that's how we are going to change our dynamic pricing going forward. And with [ Rakuten Travel ], for example, you see like different prices. But in our case, we will have our salespeople, and he will be negotiating. And the AI will help with the dynamic pricing. So there will not be any irrational discounting or any excessive leasing of floor space. So the biggest intention of using dynamic pricing and AI is to eliminate the unnecessary waste. Also 60% to 70% of our business is corporate clients, and the remaining 30% to 40% is the [indiscernible] companies which we directly call our call center to ask for their rooms. But with the AI, those kind of requests will not have to go through the call centers, and it can be done directly through the IT portal system. So using AI, we will be setting the price so that we can seek our profit. And also this will be effective for yield marketing and yield management. Also 30%, 40% will be adjusted for AI and for the enterprise customers. The dynamic pricing and the AI function will be used to support our corporate client account management.

And regarding alliance with Mitsubishi Estate, you had the Regus sales and also for Akasaka Park. I think that was the first example of business alliance. And I think you mentioned that you'd like to also consider more opportunities with Mitsubishi Estate. So are there going to be a follow-up to the Regus sales of Akasaka Park? Or are there any other areas where you can strike collaboration with Mitsubishi Estate? With the Mitsubishi Estate. I think they had the company resort business, also to real estate. And some of the new facilities were sold at a price of JPY 1 to the parking business. But I think you could be creative in trying to strike collaboration with Mitsubishi Estate. But to the extent possible, can you elaborate on the potential opportunity with Mitsubishi Estate?